n the
economic field Japan continues to be a major
trade partner of Pakistan

By SEEMA TUNIO
Isra University Hyderabad Feb-18
24, 2002

This article tries to analyze how e-commerce can
boost Pakistani exports. The major aim is to study the export trends
of Pakistan and comparing it with other developing countries exports.
Countries who want to increase their exports are utilizing the boom in
the e-commerce related fields and are growing rapidly in terms exports
with the exponential growth of internet and other e-commerce tools.
Foreign Companies are flocking on-line to take advantage of the
Internet's ability to generate efficiencies, cost savings and improved
customer relationships. The Internet is also helping companies to
compete in new markets, both domestically and internationally.

Pakistan is low-income country but shows optimistic
signs of growth. It is surviving amid ingrained economic problems like
high population growth rate, lack of foreign investment, huge
deficits, heavily indebted on foreign aid, unstable government and
large chunks of GDP going to military expenditures. And most recently
the drought like conditions in the country which is affecting 58 of
the total 106 districts in the country. Keeping aside all these
problems Pakistan has to grow utilizing its full potential and tapping
its full resources. Here, major problem with Pakistan is that Pakistan
is not trying to search the potential market of its product and make
capture major market share. If we only promote our exports properly,
the current scenario of our economy may be changes. It is however
possible if Pakistani companies use latest technology i.e. E-commerce
or Internet in discovering, developing and communicating new products
and markets.

Current exports scenario

Current state of economy of Pakistan does not
indicate a very favourable position especially in terms of exports.
The only pliable solution of the problem seems to be increasing
exports and decreasing imports. Exports are engine of growth for any
economy. Merchandise exported contributes to the rise in gross
national product. The result of growth in exports leads to lower trade
deficit and more jobs attributed to exports. Today many firms export
occasionally but want exporting plans fully integrated into their
marketing plans. Others export to two or more markets but want to
expand into many countries. Just 15 per cent of the Pakistani
exporters account for 85 per cent of the value of the Pakistani
-manufactured exports. More than half of the Pakistani exporters sell
only in one foreign market. Less than 3 per cent of the companies
export to more than 5 markets.

There is tremendous potential for Pakistan to
become more active in exports however export trends narrate another
story. Pakistan's exports in the year 2001 amounted only to $9.14
billion. It was not able to reach the target of $10.1 billion. Though
there are many reasons for low exports like global recession,
particularly in US, Japan and European union which are principal
importers of Pakistan, drought-like condition in the our country, high
cost of production e.t.c. One of major problem, which has further
deteriorated the condition of Pakistani exports, is that Pakistan has
not positioned itself as a very reliable country.

Export
of Top 17 countries: 1998

Country

US
$ billion

%

%
of globalexports

1.
United States

934

19

14

2.
Germany

623

13

9

3.
Japan

437

9

6

4.
France

387

8

6

5.
United Kingdom

373

8

6

6.
Italy

310

6

5

7.
Canada

248

5

4

8.
Netherlands

225

5

4

9.
Hong Kong

209

4

3

10.
China

208

4

3

11.
Belgium

192

4

3

12.
Spain

161

3

2

13.
Korea, Rep.

157

3

2

14.
Mexico

130

3

2

15
Singapore

129

3

2

16.
Switzerland

120

2

2

17.
Sweden

103

2

1

Total

4,946

100

72

Global
Exports

6,767

Source:
World Development report 2000-2001 New York: Oxford University
press, August 2000, pp 302,303, Table 15

If we compare Pakistan's exports in the year 1998,
it only amounted to $8.7 billion. Which means our exports comprise of
only 0.13% of world market. Pakistan can also improve its exports by
expanding its global markets. World markets is approximately 777 times
larger than Pakistani markets. Our exports are highly concentrated in
few countries i.e. USA, U.K, Japan, Germany, Middle Eastern countries.
47% of our exports are going only to six countries. Moreover some 30
per cent of Pakistan's total exports currently go to the EU, making it
the country's biggest trading partner. Last year, Pakistani exports to
the EU were valued at more than $2 billion, with cotton, textiles,
garments and leather goods accounting for 75 per cent of that. Another
23 per cent of Pakistani exports are sold in the United States.
[Source: Exports Receipts, June 2001, State Bank of Pakistan,
Statistics Department].

There is a need to expand our global market.
Competition from India, China and Asian tigers can have further
disastrous effects on our exports. Growth rates at many markets
outpace the domestic markets and beating competitors abroad can keep
you on the edge at the domestic markets as well. As our export data
related to recent years shows that Pakistan is not trading with
countries with, it has close and good bilateral relations like China,
Turkey and Iran. Pakistan exports to China, Turkey and Iran amounts
only to less than 2%, 1%, and 3% respectively.

Moreover if we look at Pakistani exports Pakistan
is still relying heavily on textile cotton and related products
constitutes around 60% of our total exports. We export commodities
like textiles (garments, cotton cloth, and yarn), rice, other
agricultural products. On the contrary we import machinery, petroleum,
petroleum products, chemicals, transportation equipment, edible oils,
grains, pulses and flour. Diversification of export trade should be
followed by Pakistani exporters. It means that Pakistan should not
rely only on Agricultural products but we should broaden our export
base. There are mineral products, canned food & software which
needs to be fully exploited and search of potential market. If we
compare Pakistan with India who is exporting assorted products we come
to the conclusion that India is exporting variety of products ranging
from software to canned food from fashion apparel to satellite
programmes.

What is E-Commerce?

We need to define Electronic Commerce before
considering its benefits for exporters. We can define electronic
commerce from four different perspectives:

Communication perspective, electronic commerce is
delivering of information, products/services, or payments via
telephone lines, computer networks, or any other means.

From a business process perspective, electronic
commerce is the application of technology toward the automation of
business transactions and workflow.

From a service perspective electronic commerce is a
tool that addresses the desire of firms, customers, and management to
cut service costs while improving the quality of goods and increasing
the speed of service delivery.

From an online perspective, electronic commerce
provides the capability of buying and selling products and information
on the internet and other online services.

There are a myriad of positive benefits associated
with E-commerce including customer convenience, increased sales,
professional image and the list goes on.

E-commerce through Internet and other devices has
revolutionized the world in past seven eight years. It all started in
1994 when Jeff Bezos working on Wall Street, watching Web usage grow
by 2300% each year. He knew that internet would be everywhere soon so
he thought of selling through Internet by launching Amazon.com at
Seattle, which is now Earth's Biggest Bookstore.

E-commerce can appear simple (well, almost) once
you understand how all the components work together. A merchant
account allows you to accept credit cards, your web host shows your
web-site to the world, your shopping cart helps your customers order
easily and real-time processing processes the orders in real-time and
approved transactions are credited to your merchant account. All are
independent components but they all function together to make
e-commerce work. Find a designer or webmaster who can bring all these
elements together on your site & watch e-commerce work for you.
[Lisa Schmeckpeper, 2001]

Electronic commerce

"Electronic commerce can play a major role in
boosting Pakistan's exports, which have stagnated.[A.R. Kemal 1998].
Pakistan can improve its condition by using E-commerce. Internet could
play a dramatic role in boosting Pakistani exports. All types of
companies in Pakistan have the excess to Internet through which they
can increase trade nationally and internationally. The Internet is a
powerful tool revolutionizing all aspects of business. However, few
firms are using the Internet effectively to generate or support
international sales. Some firms are even turning away international
orders because they are unfamiliar with export requirements. Even
developed country like America is making efforts to raise awareness
about the global scope of electronic commerce and build support for a
private-sector led approach to e-commerce policy, both nationally and
internationally. For the above mentioned purpose the U.S. Department
of Commerce, keep on informing American exporters through seminar
series on strategies and procedures that will help firms overcome the
challenges of international business and make more effective use of
the Internet to expand global sales. Pakistanis have always considered
America as a Paragon in every walk of life so why not in terms of
export policies.

Forrester Research found that the typical U.S.
Company can expect 30% of its web traffic to come from overseas —
from the day it goes into operation. It can also expect 10% of its
orders to come from abroad. However, nearly half the international
orders received by U.S. companies go unfilled. Moreover, Forrester
estimates that non-U.S. e-commerce transactions will increase from
$167.1 billion in 2000 to $3.69 trillion in 2004. This growth means
that any firm without an international e-commerce strategy will not be
able to participate in an increasing share of the available business
opportunities.

By comparing Pakistan with India we come to know
that India has focused much more attention on E-commerce related
tools. Indian companies have made themselves available at every site
thus using the Internet to export. They are concentrating mainly on
web marketing, branding and advertising internationally. Pakistani
exporters have failed grab this opportunity. Pakistan has thirty
Internet Service Providers (ISPs) and 1.2 million Internet users in
the year 2000. These internet users have increased tremendously since
then.

National Statistics conducted a survey of about
1,800 adults. They said Hotel and flight bookings are the most popular
purchases made by Britons over the Internet although well over half of
Web surfers have still not bought anything online. Official figures
showed that just over half of the adults in Britain, or about 23
million people, have used the Internet at some time. Of these, roughly
three quarters used it to find information about goods and services,
71 per cent to send or receive e-mail, and 35 per cent to buy
something. Flights and hotel accommodations made up 35 percent of the
total; books or magazines, 26 percent; music or CDs, 25 per cent; and
tickets for events, 19 per cent. Of those who bought online, only 18
percent had spent more than $736 in the past three months, and 29 per
cent had spent under $147. Another interesting finding made by them
was that the main reason given for not spending money over the
Internet was security concerns, 29 per cent said. However only 5 per
cent of those questioned had actually experienced any security
problems on the Internet. [Government statistical agency England,
2001]

Major challenges in e-commerce

It's also important to know that fraud runs rampant
on the Internet. And unfortunately Exporters bear the primary
responsibility for ensuring whether a transaction is legitimate before
filling the order. In other words, if a transaction is fraudulent,
exporter failed to take the all important steps to verify the
legitimacy of the order. While many companies are successfully using
the Internet to support their domestic activities, its use to move
into the global marketplace is posing more difficult challenges. There
are many cost and risks associated with the exporting through the net
as well. It is the company to weigh against these costs and risks.
These difficulties have led many firms, especially small- and
medium-sized enterprises (SMEs) to ignore international markets and
reject international opportunities — even when orders land on their
doorstep via the Internet. Thus there are many issues which needs to
be addressed before using e-commerce like internationalization,
multi-currency pricing and payments systems; legal and regulatory
issues; vertical and horizontal marketplaces; and fulfillment and
delivery. If one of the key benefits of electronic commerce is its
creation of a seamless global marketplace, then one of the most
significant challenges is national, legal and regulatory issues that
impact electronic commerce. From taxes and tariffs to privacy, from
consumer protection to content, government policies will play a role
in shaping the future of electronic commerce and how companies use the
Internet to transact international business. Government of Pakistan
should provide an overview of the key policy issues to watch, how they
are being addressed, and how they could impact the international
business model.

Probable solutions

Solution to these problems is neither easy nor
impossible.

1. Pakistan's all the Chamber of Commerce
with the help of Ministry of Finance and Technology should build a
comprehensive profile of countries containing e-commerce legal and
regulatory data. It should follow-up consultations with Department of
Commerce's staff of global experts. Further they should conduct
various seminars to extend the reach of the companies in industry
sectors.

2. Trade policies should provide more
incentives to the exporters.

3. Exporters could obtain a qualified export
counseling and make a master international marketing plan before
exporting business. The plan should tell goals, objectives, problems
encountered.

4. Exporters should also take sufficient
care selecting distributors abroad. There may complications in the
international combinations and transportation so chose international
distributor than a local counterpart.

5. Establish a basis for profitable
operations and orderly growth. Although no international inquiry
should be ignored but the firm that responses to unsolicited sales
lead to unmatched success. Devote continuing attention to exports. Too
many companies devote to exports when the business is falling and
again to domestic markets when the market boom and renegade it to
secondary position.

6. Do not assume that given marketing
technique works in different countries what works in Switzerland may
not be suitable for Saudi Arabia. Each market has to be treated
separately. Be willing to modify products to meet the requirements of
importers and related products.

7. Pakistan should position itself as a very
staunch and upstanding country by exporting the good quality products
on time.

Conclusion

Pakistan must act quickly in terms of adapting
E-commerce as one of the modes of exporting to other countries. The
Internet's global reach enables it to bring together far-flung
businesses into communities or hubs focused on common business
interests. In order to compete with other countries or even to survive
Pakistan should take effective measures to boost its exports, reduce
its deficit, and widen its global markets. Pakistani exporters can
increase their exports by diversifying their product markets and
product lines. Exporters should also build up good image abroad.
Image, which has been marred by delays, low quality products and
cheating.